It’s built for real small businesses: the ones with QuickBooks, tax-driven financials and an owner who does a bit of everything. No audited financials or board minutes assumed.
What’s inside
144 items in 15 workstreams. Each item says why it matters and who usually provides it: the seller, their CPA or attorney, your lender, or you.
| Workstream | Items | Examples |
|---|---|---|
| Financial & Quality of Earnings | 21 | Tax returns and IRS transcripts, bank and merchant statements, proof of cash, add-back support, working capital |
| Debt, liabilities & liens | 7 | Merchant cash advances, lien searches, payoff letters |
| Tax | 9 | Payroll and sales tax filings, bulk-sale and tax-clearance rules, purchase price allocation |
| Owner dependence & transition | 10 | What only the owner does, licenses in the owner’s name, family on payroll, the seller’s transition role |
| Customers & revenue | 11 | Customer concentration, lost customers, recurring revenue, lead sources, platform dependence |
| People & HR | 12 | Key employees, contractor classification, accrued PTO, rehiring in an asset deal |
| Operations & suppliers | 7 | Single points of failure, supplier concentration, callback logs |
| Equipment, vehicles & inventory | 7 | Titles in the owner’s name, deferred maintenance, inventory counts |
| Legal, licenses & compliance | 8 | Licenses that don’t transfer, litigation, regulator citations |
| Contracts | 8 | Change-of-control clauses, handshake deals, franchise transfer approval |
| Real estate & leases | 7 | Landlord consent, lease term vs. loan term, related-party rent |
| Environmental, health & safety | 5 | Environmental questionnaire, Phase I, safety records |
| Insurance | 6 | Loss runs, open claims, coverage bound before closing |
| Technology, data & IP | 9 | Domains and accounts in the owner’s name, customer data, account handover at closing |
| Financing & lender requirements | 17 | SBA valuation, QofE at $3M+, 1.25x coverage, 10% equity, seller notes, guarantees |
Also inside:
- SBA lender requirements, cited. 50 items are tagged “If SBA-financed” and cite SBA SOP 50 10 8.1, including the lender-ordered business valuation, the Quality of Earnings requirement at a $3M+ purchase price, the cash proof, the 1.25x debt-service coverage test and the ban on seller earnouts. Buyers using conventional financing can skip them.
- Tiered by deal size. Every item is tagged Main Street (under $2M), lower middle market $2M–$5M, or $5M+, using the IBBA and M&A Source bands.
- Core vs. if applicable. Filter to the Core items and you have the list every deal needs; add the rest when the business has inventory, real estate, a franchise or a software product.
- A working tracker. Status drop-downs, requested and received dates, notes, and a progress tab that counts what’s done in each workstream.
Who it’s for
- Buyers: first-time acquirers, searchers, independent sponsors, family offices and smaller PE firms doing add-ons. Use it to request documents and track diligence from LOI to closing.
- Sellers: owner-operators getting ready to sell. Use it to see what buyers and their lenders will ask for, and build your data room before you go to market.
- Brokers and M&A advisors: use it to prepare sellers and keep buyers organized.
How to use it
- Filter to what applies. Set Priority to Core and Deal size to your tier, then add the “If applicable” items that fit the business.
- Track as you go. Update Status and dates as documents come in. The Progress tab shows what’s still open.
- Bring in your team early. Hand the financial items to your Quality of Earnings provider and the legal items to your M&A attorney. If you need one, submit a project at DueDilio and compare proposals from vetted service providers.
FAQ
Frequently Asked Questions
At a minimum: three years of tax returns and financial statements, bank statements to prove revenue, the seller’s add-back schedule with support, customer concentration, key contracts and leases, licenses, litigation, payroll and tax filings, and insurance. For a small business, also check how much depends on the owner personally: their relationships, their licenses and the work only they do. This checklist covers all of these in 15 workstreams.
Most diligence happens during the exclusivity period set in the letter of intent, often 30 to 90 days. Financial diligence usually takes longest, and SBA-financed deals also need the lender’s valuation and, at larger prices, its Quality of Earnings review. Sending a complete request list on day one is the easiest way to keep the timeline.
On an SBA 7(a) loan for an Initial Acquisition or Business Expansion, the lender must obtain a QofE when the business purchase price is $3 million or more, excluding real estate (SOP 50 10 8.1, Appendix 15, Para. C.1.b). Below that it’s your choice, but many buyers get one, often a lighter scope, because it’s the most reliable check that the earnings behind the price are real. Confirm current rules with your lender.
Among other things: the three most recent years of business financial statements or tax returns, verified against IRS transcripts; the current interim statement and the same period last year; a business valuation the lender orders; and enough adjusted cash flow to cover all debt payments at least 1.25 times (SOP 50 10 8.1, Appendix 15, Para. C.1–C.2). The “If SBA-financed” items in the checklist list each requirement with its SOP reference. Confirm current rules with your lender.
Yes. Every item that a buyer requests is something the seller will need to produce, and the “Who provides it” column shows whether it comes from you, your CPA or your attorney. Working through it before you go to market shortens diligence and reduces surprises that lead to price cuts.
Yes. It assumes an asset purchase, the most common structure for small businesses, and flags the extra items that matter in a stock deal with “(Stock deals).”
The M&A Due Diligence Checklist article explains the workstreams and how to turn findings into price and terms. This page is the working file: the item-by-item tracker you download and fill in on a live deal.
Related resources
Downloads
- Buying an Existing Business Checklist: the end-to-end process, from buy box to the first 100 days.
- Pre-LOI Due Diligence Checklist: screen a deal before you make an offer.
- Due Diligence Document Request List: the cover letter and request list to send the seller.
- Technology Due Diligence Checklist: for software and tech-enabled businesses.
Guides
- M&A Due Diligence Checklist: Workstreams & Documents: how each workstream works and what to do with what you find.
- Understanding Financial Due Diligence in Small Business Acquisitions
- Customer Due Diligence for Small Business Buyers
- The Essentials of Legal Due Diligence in Business Acquisitions
- Operational Due Diligence for Business Acquisitions
The checklist is educational and is not legal, financial, tax, accounting or investment advice. DueDilio is a marketplace that connects buyers, sellers and intermediaries with vetted, independent service providers; we don’t perform these services.